Tips For Before And After Your Funding from Sanjay Anandram, Sanjiv Mittal, Manu Parpia

Before Funding – Sanjay Anandram, JumpStart Ventures
— Cash is King
— Activities have to be thought out from the ground up, not from a top-down approach: you have to figure out, what will it take to get my first customer, who is willing to pay. And then the next and the next. How many people will I need to hire, how many prospects do I need to meet, to satisfy that customer what kind of technology do I need to have built in? Look at a 12 months cycle – what are the activities, resources, and time for output that I expect to achieve, and at the end of some time limit, what are the so called “Fundable events”. What would I have achieved at the end of all of these milestones, such that if an external person were to look at my company, he or she would say that you have you have made progress. Progress is from the standpoint of actual business output.
— There’s a startup that said that they’ve used Rs. 2 crores, and then at the end of 8 months they come back for more cash. They say they’ve been ISO certified, have an operations manual, lovely office, have trained my people. All of that is not a business end, and these are not fundable events.
— The single most important thing that people look for, is the cashflow. If you’re running out of cash in Q4, you’d better start hitting the fundraising trail in October.

More on funding expeirences from Bharti Telesoft, and some great tips from Manu Parpia

Funding Experiences – Sanjiv Mittal, Vice Chairman, Bharti Telesoft
Gone are the dot com days wher you could raise money using just a business plan. The investors want to know – what is your business, the traction, scalability. Keep in mind – “VCs are not interested in funding real startups.” Profit is not important, but customers validating the business is what makes a difference. That’s when you can start having discussions.

Take the example of BTSL – we signed a term sheet. Then one person decided not ot join us, and the VCs changed their mind and nothing happened. We started building up at this stage, cut down expenses. We moved from a big office to a small office, closed down offices in the US and UK. 2001 was not the right time for a startup. We started doing business in India, and started going to emerging markets, particularly Africa. We picked up business from Africa in 2002. We managed to run the business, managing month on month, quarter on quarter. We managed by not paying suppliers on time, or salaries were late – we just managed.

In 2003, someone asked us and we said that we’re now out of the ICU. It was in 2005, when we had good profits, and we had people chasing us – VCs were interested. We took funding from Sequoia and Cisco in 2005, when we didn’t really need it. VCs don’t want to fund you when you need the money, and are in survival mode. When you don’t need it, they’re want to invest in you. Managing VCs is another thing altogether…if the company doesn’t do as well as projected, you could find that when there’s an exit, VCs make more profit than the promoters.

Once Funded – Manu Parpia, Founder and Vice Chairman, Geometric LtdNow that you have funding
— Review your business plan – The whole game changes once you have funding. Investors hate surprises. Make sure you highlight risks and problems.
— Understand your board – this is very important. If you take funding from 2-3 people, each will have a person on the board. Pre-funding, you’re answerable only to yourself. You need to know whom you can count on, what are they looking for, what are their motivation. Who can help you and how can they help you.
— Conserve your capital – cash flow is really really really important. It’s the number 1 thing. If you are behind in the next round, it will really cost you. Your valuation will go down.
— Identify key parameters – quarter on quarter, things in the pipeline. Choose which are appropriate for your business and prepare a dashboard. It’s for your investors, but also for you – you need to understand how your business is shaping up. Make sure you incorporate investors viewpoints for the dashboard. Publish it in a timely manner, send it to your investors. I would urge you to call up your investors, and ask if they have any questions. Be honest, and highlight problems.
— Don’t forget about yourself – take a salary. Also don’t expect others to draw a low salary – they don’t own as much equity as you do. When it goes wrong
— Raise the issues before everyone else.
— Ask for help, speak to your board. You need to have built a relationship with them. Acknowledge errors and failures
— Provide information to the board to prevent it happening again.
— Provide options to the board – sell the company etc. Gearing up to go public
— follow best practices and governance. Avoid scandals. Funding and getting investment is what prepares you to go public.
— Have transparency in your approach.
— Have a provable scalable model. When we went public, we didn’t have a scalable mode, which is why we got screwed in the market.
— Have a good management team